Estate or legacy planning is the act of preparing how you will pass down your assets and property to your loved ones after your death. Samuel Dickson Tan, legal counsel and founding member of the Asia Estate Planning Association, explains what you need to know about it, from how to prepare your will to estate planning and completing your lasting power of attorney.
Q. Why is estate planning important and why should we do it?
Samuel: Estate planning is one of the most important things you can do for your loved ones. It provides directions for them on what to do with your assets, thus giving them peace of mind and preventing any infighting over your estate.
Q. Is estate planning only for elderly or wealthy people or people with dependents?
Samuel: It is recommended for anyone with assets that belong to them and the people they love. This should cover just about everyone, regardless of whether they are high net-worth individuals or not.
Q. What does estate planning entail, and should you engage a professional to help you with it?
Samuel: A professional can help you execute your wishes, define your beneficiaries, and determine your assets and transfer them in the most effective manner, using legal instruments like wills and trusts. You can always do your will yourself but it’s a good idea to get help from an experienced professional who can help you uncover any blind spots.
Q. What is a will?
Samuel: This is a legal document that sets out your instructions and final wishes for your executors, guardians and beneficiaries. You have to be 21 years old and of sound mind to be able to do your will.
Q. What is a trust?
Samuel: This is a legal arrangement giving a trustee the authority to manage assets for the benefit of the beneficiaries. Many families have trusts so that they can continue to provide for minor children, elderly parents and vulnerable family members over an extended period of time.
According to a report published in 2012, a total of US$40 trillion will be passed down to the next generation. We are witnessing the greatest transfer of financial wealth in human history and the majority of that wealth will go to our children, whether they’re ready or not. I therefore recommend that parents with young children consider getting their wills or trusts done to ensure that their kids receive their assets at an appropriate time, when they’re mature enough to manage these assets themselves.
Q. What is a lasting power of attorney (LPA) and why is it important to have one?
Samuel: This is a legal document that appoints persons (called donees) to make decisions on behalf of the donor (the person doing the LPA).
If you lose your mental capacity, you’ll need someone to make decisions on your behalf with regards to your personal welfare and financial matters. The LPA empowers your donee to protect your interests during your lifetime. Whom you choose as your donee is up to you but it should be someone you trust with your life and monies. In the absence of an LPA, your family would need to get a court order to empower a deputy to make these decisions on your behalf. This could potentially be time-consuming, stressful and expensive, which is why the Office of the Public Guardian has been encouraging Singaporeans to complete our LPAs while waiving the LPA registration fees for us.
Q. How might a family be affected when their main breadwinner passes away without a will or any plan for how their estate will be distributed?
Samuel: This is an unfortunate but very real situation for many families, and it can leave them feeling helpless and confused. Leaving a will provides much-needed clarity on what needs to be done and the probate process may be faster, simpler and cheaper. If you pass away without a will, the rules of intestate succession will determine who should inherit your estate. If you were to go down the list, your estate could potentially be “inherited” by the government (although this is very rare). Not having a will may also result in administrative issues, delays, increased legal costs and even long-term family infighting and resentment.
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